Filed Under:Agent Broker, Agency Management

The Challenges of TRIA Reauthorization

Dan Brown, a partner in the San Francisco office of Dentons, focuses his practice on representing insurance companies, agents, and brokers, as well as other clients involved in all aspects the surplus lines insurance markets in the United States. Gary L. Goldberg and Mary Pat Lawrence are principals in Dentons’ Public Policy and Regulation practice, resident in the firm’s office in Washington, D.C. 

The Terrorism Risk Insurance Program Reauthorization Act of 2007 requires the US President’s Working Group on Financial Markets (Working Group”) to perform an ongoing analysis of the long term availability and affordability of insurance for terrorism risk, and report to Congress thereon.

On July 16th the US Department of Treasury posted a Notice seeking public comment on these subjects to assist in the preparation of its report. The Working Group’s report will be submitted to the Senate Banking Committee and the House Financial Services Committee, the respective Congressional committees of jurisdiction. While the final date for comment submission is September 16, 2013, early submissions are encouraged.

Currently, there are three bills in the House of Representatives (H.R. 508, H.R. 1945, and H.R. 2146) that would reauthorize the Terrorist Risk Insurance Act (TRIA) program, which is set to expire on December 31, 2014. (While Section 319 of the Senate-passed budget resolution provides for a deficit-neutral reserve fund for terrorism risk insurance, as yet, there are no Senate bills submitted in this Congress to extend the TRIA program.)

Terrorism Risk Insurance Act of 2002 Reauthorization Act of 2013 (H.R. 508)

H.R. 508 was introduced by Rep. Grimm (R-NY) on Feb. 5, 2013 and has 63 cosponsors, 29 Republicans and 34 Democrats. Congresswoman Carolyn Maloney, the Ranking Member of the Capital Markets Subcommittee of the Financial Services Committee, is the lead Democratic co-sponsor of H.R. 508. The bill has been referred to the House Financial Services Committee but has yet to be referred to a subcommittee. The bill provides for a simple five year extension of the current program without making many program changes, which may explain why it has gained the most bipartisan support.

  • Extends the current TRIA program five years, through December 31, 2019.
  • Requires the Treasury to collect premiums by September 30, 2024.

Fostering Resilience to Terrorism Act of 2013 (H.R. 1945)

H.R. 1945 was introduced by the Ranking Member of the House Homeland Security Committee Bennie Thompson (D-MS) on May 9, 2013. The bill expands the Department of Homeland Security’s (DHS) authority to oversee the program and makes additional DHS security enhancements, particularly with respect to cyber-security. As a result, the bill has been referred to both the House Financial Services Committee and House Homeland Security, where it was referred to the Subcommittee on Cyber security, Infrastructure Protection, and Security Technologies. Currently, the bill has five cosponsors, all Democrats.

  • Extends the TRIA program 10 years, through December 31, 2024.
  • Requires the Treasury to collect premiums by September 30, 2024.
  • Requires reports in 2013, 2017, 2020, and 2023 on the findings of the Working Group pursuant to an ongoing analysis regarding the long-term availability and affordability of insurance for terrorism risk.
  • Introduces a new section, that would require the Secretary of DHS to provide insureds under the program, through the Secretary of the Treasury, with timely information, including appropriately classified terrorism risk information and information on best practices, to “foster resilience” to a terrorist act.
  • Requires the Secretary of DHS to conduct research to determine the extent to which such insureds, particularly insureds in critical infrastructure sectors, incorporate such best practices information into their business operations.
  • Revises the definition of an “act of terrorism” to mean any act that is certified as meeting the specified criteria for such an act by the Secretary of Homeland Security, in concurrence with the Secretary of the Treasury (currently, by the Secretary of the Treasury in concurrence with the Secretary of State)—essentially transferring this responsibility from the Secretary of State to the Secretary of Homeland Security.

Terrorism Risk Insurance Program Reauthorization Act of 2013 (H.R. 2146)

H.R. 2146 was introduced by Rep. Michael Capuano (D-MA), the Ranking Member of the House Financial Services Subcommittee on Housing and Insurance on May 23, 2013. Currently, the bill has 26 cosponsors, 25 Democrats and 1 Republican. The bill has been referred to the House Financial Services Committee, but has yet to be referred to a subcommittee.

  • Extends the TRIA program for ten years, through December 31, 2024.
  • Requires the Treasury to collect premiums by September 30, 2027.
  • Requires reports in 2013, 2017, 2020, and 2023 on the findings of the President’s Working Group on Financial Markets pursuant to an ongoing analysis regarding the long term availability and affordability of insurance for terrorism risk.

Conclusion

The fight for a TRIA extension will be difficult. One of the major hurdles to passing an extension of TRIA of any duration is the continuing opposition of many House Republicans, especially in the committee of jurisdiction—the House Financial Services Committee. House Financial Services Chairman Jeb Hensarling (R-TX) has already clearly signaled his opposition to a TRIA extension and his interest in phasing out and eventually eliminating the program.

The House Financial Services Committee’s oversight plan for the 113th Congress notes that the Committee “will examine the private sector’s capacity to assess and price risk for terrorism. The Committee may also consider proposals that would phase out the Terrorism Risk Insurance Program by encouraging private industry to develop dedicated capital for underwriting terrorism risks, and significantly reducing the potential Federal exposure and participation in terrorism insurance over time.” Against this backdrop of House Republican opposition, especially the desire of many conservative Republicans to enhance the private sector’s role and reduce the footprint of government-backed programs, it will be a challenge for TRIA’s proponents to craft a compromise and persuade Chairman Hensarling that another TRIA extension is necessary and appropriate.

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